Why is the market so hot?!!!!

It always boils down to the fundamentals — Supply and Demand. We know that the Bay Area is always supply constrained and the real estate collapse took many of the higher density projects and put them in a deep freeze, meaning we had even fewer new projects adding to the supply from 2008 ’til today. Now we have a new phenomenon, for all the people that got foreclosed on and were supposedly going to be renters the rest of their lives, it turns out they still want to buy homes and for the many that got foreclosed early in the cycle their time in the penalty box is over.

http://www.insidebayarea.com/business/ci_21865117/foreclosure-victims-buying-homes-again

And as foreclosures in CA and the Bay Area continue their downward trajectory, people waiting for that ‘distressed’ buying opportunity may never see it materialize.

http://www.foreclosureradar.com/foreclosure-report/foreclosure-report-september-2012

Rather than competing with 10-20 other offers as soon as a ‘bank-owned’ home hits the market, buyers are finding the process of buying a new home to be more appealing as builders ramp up community production.

http://www.sfgate.com/realestate/article/Bay-Area-new-home-construction-rebounds-3986773.php#page-1

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

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The Bay Area housing market is back on fire… but is it sustainable???

What can we attribute the turnaround in the market too? In simple terms, it’s back to the old supply/demand curve. In the depths of the housing market depression (think back to 2009), many cities were running resale inventories of several hundred homes and typically at least 50% of those homes were in some sort of distressed condition (bank owned, short sale, etc.).

Now, when we look at the market it’s done a complete 180. Inventory levels are down to their lowest levels since the peak of the housing market back in 2005-2006 and the percentage of distressed sales is down significantly from a few years ago. The question everyone should be asking is whether this is sustainable or is the “shadow inventory” of distressed homes about to flood the market and put a damper on things.

In our opinion, given how low the inventory levels are and the strength of most markets, even a doubling in the number of distressed homes on the market will probably not have much of an adverse effect on the market and in some circumstances might actually be helpful. FULL STORY

Source: Steve Reilly, Marketing Consultant, (925) 368-3128

Take a quick look at the inventory and sales levels of many of the East Bay Cities and decide for yourself if we’re in the beginning stages of a long term bull market in housing.

Active Listings Distressed Listings Percent Distressed Avg Monthly Sales Rate Months of Supply Based on 2012   Closed Sales
Antioch 101 55 54% 123 0.82
Brentwood 71 24 34% 82 0.87
Castro Valley 71 12 17% 41 1.72
Concord 73 34 47% 99 0.74
Disco Bay 43 8 19% 24 1.76
Dublin 22 9 41% 27 0.81
Fremont 133 10 8% 122 1.09
Hayward 82 30 37% 97 0.85
Livermore 85 16 19% 82 1.04
Oakley 39 17 44% 46 0.85
Pittsburg 34 19 56% 56 0.61
Pleasanton 67 6 9% 57 1.17
San Leandro 50 12 24% 72 0.69
San Ramon 49 12 24% 61 0.81
Union City 30 13 43% 36 0.83
Walnut Creek 57 2 4% 47 1.23

San Diego: How Banks Helped the Housing Market Get Back On Its Feet

“Shadow Inventory” was a dirty word for most of the past recession with respect to the housing market.  In general terms, it meant there was a large number of homes in foreclosure or soon to be foreclosed upon, which would flood the market and drive down home prices, and keep the housing market on its heels for years to come.  While no one will argue that the sheer volume of foreclosures nationwide and in Southern California is substantial, the threat of flooding the market has not materialized. 

 In San Diego County, as in most areas of Southern California, the Banks were smart and only released foreclosures to the marketplace in measured increments, so as to attract interest in inventory at reduced prices without flooding the market.  San Diego County foreclosures have recently been reported to be down 51% in comparison to a year ago.  As a result, investment groups interested in purchasing large quantities of lower priced foreclosure properties for the strong rental market have helped generate an overall market craving in San Diego County for relatively low-priced housing (generally posture below approximately $500,000).  Brokers active within marketplaces sporting significant volumes of housing priced below $500,000 report multiple offers for any available inventory, often driving up prices.  The average price of new and existing housing sold last month in San Diego County ($335,500), accounted for a 1.7% increase over the average price of homes sold in June of 2011.  The total sales volume in the resale market county-wide for single family detached homes through the first half of 2011 represents almost a 10% increase over the first six months of last year.

 

The market recovery for low-priced housing, coupled with long-standing reduced interest rates, is very slowly beginning to work itself up the price ladder of housing throughout San Diego County.   For example, in higher priced submarkets such as the North County Coastal Area, rates of absorption for new home developments have grown from an average of one sale per month per project last year, to approximately two sales per month in 2012. 

 Although generation of new jobs in San Diego County is headed in the right direction, the slow pace of employment growth has been the major force preventing a rapid recovery in the housing market.  With the potential cut back in government defense spending in San Diego County next year, the pace of job growth is not expected to pick up in the very near term.  However, continued low levels of housing inventory (the number of homes listed for sale at the end of the 1st Quarter of 2012 fell to its lowest level in nearly three years), government maintenance of low interest rates, and continued growth in demand for rental housing is expected to continue to fuel the housing market recovery, but at a continued gradual rate of growth.  Most economic forecasters are predicting housing appreciation in San Diego County in the near term to range between approximately 2% and 3% annually.  The moderate pace of market recovery may be a blessing in disguise; as a more gradual velocity in recovery will give the market its legs for more sustained growth; in contrast to the rapid inflation run-ups of past market cycles which eventually lead to faster boom to bust corrections. 

 Down the road, this bona fide housing recovery at the bottom of the “food chain” so to speak, will likely be looked upon as the flash point which signaled the beginning of the market recovery in the housing market in San Diego County.

 Source: Bob McFarland, Marketing Consultant, (858) 568-7428 ext. 12

Inland Empire… It’s FBO!

Economic news in Southern California’s Inland Empire appears to be looking up these days.  But is the homebuilding recovery here to stay?  Is it Facebook Official?

Last week, Land Advisors’ Senior Marketing Consultant Doug Jorritsma gave a presentation to a group of professionals regarding the state of the land/homebuilding market in the Inland Empire (Western San Bernardino & Riverside Counties).  On board with the wave of social media sweeping our communication style these days, Doug kept the message short, sweet, and direct, highlighting the market facts with a Facebook-like thumbs up or thumbs down.  Check ‘em out here…

DISLIKE

  • Unemployment/job generation still a big problem
  • State financial crisis looms large (Redevelopment Agencies and Schools)
  • Construction lending still challenging
  • Number of housing permits is currently 28% of what is was at the market’s peak

LIKE!

  • The worst is behind us!
  • Lenders dispositions are done! (Except for the little stuff.)
  • Most public and private homebuilders will be increasingly active going forward
  • Single and multi-family building permits are on the rise – (Currently DOUBLE 2009 numbers)
  • Institutional capital and private equity slowly giving THUMBS UP
  • No finished lot supply creates a near-term shortage
  • Land values are slowly trending up
  • Foreclosure activity is trending down
  • Five-month upward trend of improving new home sales
  • Big box industrial gets a double THUMBS UP
  • Interest rates are to remain low through 2014
  • Consumer confidence is improving which means retail sales are improving
  • Apartment vacancies currently at 4% – 6%, rents are up 1% – 5%

Land Advisors ♥’s Social Media

Source:Doug Jorritsma, Senior Marketing Consultant, and Winn Galloway, Senior Marketing Consultant (949) 852-8288

N. Central Valley Gears Up for Recovery

Land Advisors’ Northern California Team is proud to announce that it recently closed 507 single family lots in finished condition in the northern part of the City of Merced, a project known as Bellevue Ranch West.  The buyer is a long-time local farming family who plans to hold the asset as a long-term investment.

Although little building activity is occurring in Merced County at the moment, K. Hovnanian Homes is currently open and selling homes in one project.  The project, known as Eagles Ridge, is an active adult community in the Santa Nella market.

Despite the fact that Merced County new home closings are projected to hit a post-crash low volume in 2012 (off 98.9% from peak new home closing volume), year-to-date home prices are starting to rebound for regular re-sale and REO transactions with each up 2.47% and 1.96% respectively from their troughs. In addition, foreclosure sales (borrower-to-lender) are down 75.13% year-to-date from the 2008 peak.  REO (bank-to-new-buyer) sales are down 71.38% from their peak in 2009.  Our interpretation is this represents a positive sign that the overall Merced County housing market is healing – slowly but surely. (Source: Housing Intelligence Pro by Hanley Wood)

BIG LISTING: As part of a recent major lender-owned land listing for the California Division of the Land Advisors Organization, the Land Advisors Northern California Team covering the North Central Valley is actively looking for buyers for six assets in the bank’s portfolio.  Collectively, the listed assets include 479 single family homes in varying stages of development.  These asset sales represent the last few remaining bank-owned deals in the North Central Valley.  They should attract multiple investors and likely a few builders as the chance to buy lots well below replacement cost dwindle statewide.

Asset Breakdown:

  • Atwater:  Stonecreek – 129 Single Family Detached Lots in Finished Condition;
  • Winton:  Winfield Station – 22 Single Family Detached Lots in Finished Condition;
  • Modesto:  Thomas Terrace – 9 Single Family Detached Lots in Finished Condition;
  • Ceres:  Bing Cherry Estates – 39 Single Family Detached Lots in Finished Condition;
  • Merced:  Amberly Court – 162 Single Family Detached Lots in Rough Graded Condition (on 15.93 acres); and
  • Sage Creek – 118 Single Family Detached Lots in Rough Graded Condition (on 13.55 acres).

Other North Central Valley Updates:  San Joaquin County is experiencing improved new home sales in the towns of Mountain House, Manteca, and Lathrop.  New home projects are getting started in Stanislaus County, with two in Oakdale and one in Patterson.

Slow and steady as they are… all signs of building activity in the North Central Valley show that we are on our way to recovery!

Source: R.J. Radler Senior Marketing Consultant, (916) 784-3329 ext. 12; and Jim Radler Senior Marketing Consultant, (916) 784-3329 ext. 11

 

Central Valley Housing Market on the Mend?

Home sales are typically slow everywhere in December but some markets in the Central Valley showed signs of life at the end of 2011. According to Affiliated Appraisers, the median sale price for existing single family homes in the Bakersfield area was $132,000 in December 2011, up 9.6% over December 2010. The supply of active listings of homes for sale dropped 9.3%.  Foreclosures continue to significantly weigh on the market as bank-owned property accounted for roughly a third of the homes sold in 2011.

Investors for single family homes, who buy property to rent to tenants, are returning to the Central Valley, and made up roughly a third of home sales in 2011.  Some successful investors were able to “flip” property for a profit.  Affiliated Appraisers reported that 23 homes were “flipped” in the Bakersfield area since April 23 of 2011. 

Home prices have fallen a whopping 56% from the peak in June 2006 (current median home price is $131,500).  As long as banks do not flood the market with distressed product, home prices should remain somewhat stable in the coming months.

As a consequence to uncertainty in traditional financial investments like stocks and bonds, Central Valley investors have now turned to existing multi-family buildings. As banks continue to work through their single family detached REO inventory, this seems like a logical place to deploy capital. Occupancy rates are hovering around 90% for even for C and D level properties.  The Bakersfield area market had over 160 multi-family residential sales transactions in 2011.   However, it still makes little sense to develop new multi-family land at this point, as direct costs and fees are prohibitive.

Source: Jason Hepp, Senior Marketing Consultant, (661) 702-9080 ext. 14

Homes Sales jump in Santa Clarita Valley

Sales of existing single family homes in the Santa Clarita Valley (SCV) jumped a whopping 22.2% in October, while the overall California home sale market increased by only 3.1%. Existing home sales rose by 7.3% and condo sales rose by 28.8% from September to October in the SCV.

As parts of the SCV are nicknamed “Awesometown,” this suburban region just north of the Los Angeles Basin is a highly desirable place to live. With homes more affordable than ever and record low interest rates on home loans, the local SCV single family home market is performing better than the San Fernando Valley, where the median price of homes that sold last month was $350,000.  

Multi-family construction is up throughout L.A. County.  However, permits for single family housing still rule the Santa Clarita Valley. Single-family construction has historically been more consistent than multi-family projects.

Very few distressed/bank owned residential land assets are currently available for sale in the Santa Clarita Valley.

Source: Michel Faris, Marketing Consultant, (949) 852-8288 x14